Both parties are in fantasy land – but Sunak’s tax attack on Labour is rich given what his government has cost voters
Before we get on to any of the numbers – from Rishi Sunak’s claim about Labour raising taxes by £2,000 to the more outlandish numbers going around today – here’s the most important thing you have to know right now.
The parties fighting this election have yet to publish their manifestos. They might come as soon as next week, but until those documents, with their shopping lists of confirmed policies, actually land, we are in a kind of policy no man’s land where each side is guessing (and sometimes plain making up stuff) about what the other side actually wants to implement if they win the election.
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And since all parties like to talk a lot about exciting new things they’d spend money on and not half as much about the taxes they’d raise to pay for all that stuff, it doesn’t take a mathematical whizz to realise that if you take them all quite literally then you can impute some pretty big “black holes” in their plans.
Those “black holes” matter because both Labour and Conservatives have signed up to fiscal rules preventing them from splurging without limit. So if there is a hole, the assumption is it would have to be filled by raising taxes.
However, in the absence of either manifestos or detailed costing plans, the best we can do about all this for the time being is to speculate.
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Does Sunak’s claim about Labour taxes stand up?
That brings us back to the claim Rishi Sunak made in last night’s debate, that Labour will raise everyone’s taxes by £2,000. This is a direct consequence of this information vacuum.
It comes from a “dossier” published by the Tories last month, back before the election was called, which purported to calculate all Labour’s proposed tax and spending plans.
The headline finding from that paper was that over the course of the next four years Labour had roughly £59bn of spending plans (at least as far as the Tories claimed) but only £20bn of revenue raising plans. That leaves a £39bn hole. Divide that £39bn by the number of households in the country (18.4m) and you get a figure of just over £2,000. Voila: £2,000 of unaccounted tax rises or spending cuts which, said Rishi Sunak last night, would inevitably be filled with extra taxes.
Now, there are all sorts of objections to the way the Conservatives have carried out this exercise. For one thing, they deployed a weapon Labour don’t have: because they’re the party of government they were able to ask Treasury civil servants to cost some of the Labour policies (or rather, the policies they think Labour will implement – remember, those manifestos haven’t yet been published!).
Today there has been a backlash – including from the Treasury’s permanent secretary himself – about the way the Tories have portrayed these sums.
What the Tories have already cost households
The £2,000 figure isn’t really a Treasury calculation or for that matter an “independent” one, as Mr Sunak called it last night. It’s a Conservative figure – but it was put together in part with figures commissioned from civil servants.
There were other objections: Labour say many of the policies in that Tory dossier won’t cost half as much as the Conservatives claim.
But actually, surprising as it might sound, what’s most striking about this “bombshell” is how small it really is. Less of a bombshell; more of a hand grenade.
While £2,000 sounds like a big number, it’s actually a cumulative total from four years. A far more representative figure to take from the dossier is £500 – the annual figure.
And while that’s not to be sniffed at (if you believe it – which you probably shouldn’t) it’s far, far smaller than the tax rises we’ve all experienced under this Conservative government since 2019. They amount, all told, to an average of around £3,000 a year per household or, if we grit our teeth and tot it up as the Tories did in their dossier, over £13,000 over the course of the parliament. Which rather dwarfs that £2,000 figure.
Labour attack dossier is even more outlandish
So anyway, you’re probably hoping now we’ve explained the £2,000 from last night that we could leave things there. But sorry, no.
Because, this being the murky pre-manifesto period, Labour have gone one further and produced their own dossier, purporting to show Conservative fiscal plans for the coming years. But while the initial Tory document was somewhat conservative (with a small c) about its numbers, the Labour version is far more outlandish.
It assumes, for instance, that the Conservatives are planning to abolish National Insurance and inheritance tax overnight if they are elected. These are mammoth tax changes which the Conservatives have never committed to (they have made some vague noises about intending to abolish NICs but not in the next parliament).
Anyway, the Labour document takes these and other policies and works out that that would imply a black hole of roughly £70bn a year or a whopping £270bn when you tot up the first four years of the parliament (they actually provide five years of numbers but for the sake of comparability I’m looking solely at the first four years, as the Tories’ dossier did).
Divide that by the number of households (as the Tory document did) and you end up with a grand total over those four years not of £2,000 but of a staggering £14,000 per household.
Parties trading blows in the realms of fiscal fantasy
At this stage, now we’ve completely departed from realistic policy, you’re probably wondering when this silly saga will be over. Sadly the answer is: not yet.
Because having seen the Labour response, the Conservatives produced a second dossier, essentially saying: “Well, if you’re going to make all sorts of outlandish assumptions about the stuff we’ve vaguely talked about then can we have a go too?”
This final dossier includes all sorts of policies no one seriously expects Labour to implement this parliament: cutting corporation tax to 12.5%, scrapping business rates altogether, introducing French-style union laws. Add this all up and you end up with a grand total of £211bn a year or – if you multiply that by four years across a parliament, £844bn. So the best part of a trillion pounds.
We are of course in the realms of fiscal fantasy at this stage, but if you take that cumulative total and divide that by the number of households in the country you end up with an utterly ridiculous figure of £46,000.
Whether either party thinks these dossiers will change anyone’s mind in this election remains to be seen.
Right now they mostly look like an attempt to send economics correspondents completely crazy.
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Both major parties are committed to tax rises
But the overarching point is as follows: both the major parties are committed to tax rises in the coming years. We know as much because the official Office for Budget Responsibility plans will see the tax burden increase sizeably, in large part because the main tax-free allowances are being frozen, ensuring everyone ends up paying more tax, once you adjust for inflation and rising wages.
These tax rises – the long-term consequences of the pandemic and the energy price guarantee – are quite likely to dwarf any measures we hear about in the coming manifestos.
But until we get those manifestos, the rest is, yes, speculation.
Britons buying cocaine on a Friday night could be inadvertently funding Russia’s war in Ukraine.
The National Crime Agency has revealed a billion-dollar money laundering network is operating in 28 towns and cities across the UK.
Couriers collect “dirty” cash generated from drugs, firearms and immigration gangs, which is then converted into cryptocurrency.
Officials say these illicit transactions have a direct link to “geopolitical events causing suffering around the world”.
This network was first exposed because of Operation Destabilise – and to date, 128 arrests have been made, with more than £25m in cash and digital assets seized.
A poster put up in motorway service station toilets by the NCA. Pic: PA
According to the NCA, the enterprise is so prolific that it purchased a bank to facilitate payments that supported Russia’s military efforts and helped sidestep sanctions.
Posters have been put up in motorway service stations to target couriers, which warn it is “just a matter of time” before they will be arrested.
The NCA’s deputy director for economic crime, Sal Melki, has warned the threat posed by this money laundering network is significant.
He added: “Cash couriers play an intrinsic role in this global scheme. They are in our communities and making the criminal ecosystem function – because if you cannot profit from your crimes, why bother.
“They are paid very little for the risks they take and face years in prison, while those they work for enjoy huge profits.”
Mr Melki went on to warn that “easy money leads to hard time” – and earning just a few hundred pounds through laundering could lead to years behind bars.
Sal Melki
The NCA says Operation Destabilise has already had an impact in criminal circles, with some members of the network now reluctant to operate in London.
Those involved in the money laundering effort have also started to charge higher fees – reflecting the difficulty of cleaning ill-gotten gains.
Cryptocurrencies are often regarded as a haven for criminals because they are perceived to be anonymous, but it is possible to trace these transactions.
Chainalysis is a company that monitors suspicious activity on blockchains, a type of database that keeps records of who sends and receives digital assets – as well as how much.
Its vice president of communications Madeleine Kennedy told Sky News: “Public blockchains are transparent by design, which makes cryptocurrencies a poor vehicle for money laundering.
“With the right tools, law enforcement can trace illicit funds – whether they’re connected to drug trafficking, sanctions evasion, or cybercrime – and use those insights to disrupt networks and recover assets.”
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Ekatarina Zhdanova. Pic: NCA
Last December, a global investigation led by the NCA smashed two networks whose money laundering activities were prevalent in 30 countries.
Bundles of cash were seized during raids, with detectives describing Smart and TGR as the invisible link between “Russian elites, crypto-rich cybercriminals and drug gangs in the UK”.
One of the network’s ringleaders, a Russian national called Ekatarina Zhdanova, is currently in custody in France and awaiting trial for separate financial offences.
Security minister Dan Jarvis added: “This complex operation has exposed the corrupt tactics Russia used to avoid sanctions and fund its illegal war in Ukraine.
“We are working tirelessly to detect, disrupt and prosecute anyone engaging in activity for a hostile foreign state. It will never be tolerated on our streets.”
UK
Energy minister says ‘there’s no shortcut’ to bringing down bills – as Ofgem set to announce new price cap
Households and businesses will have to wait for energy bills to fall significantly because “there’s no shortcut” to bringing down prices, the energy minister has told Sky News.
Speaking as Chancellor Rachel Reeves considers ways of easing the pressure on households in next week’s budget, energy minister Michael Shanks conceded that Labour’s election pledge to cut bills by £300 by converting the UK to clean power has not been delivered.
It comes as the energy regulator Ofgem is set to announce its latest price cap this morning. Analysts expect the cap, which currently sits at £1,755 per year, to fall by 1% for a typical household – leaving energy bills still 35% higher than pre-Ukraine war levels.
The UK has the second-highest domestic and the highest industrial electricity prices among developed nations, despite renewable sources providing more than 50% of UK electricity last year.
“The truth is, we do have to build that infrastructure in order to remove the volatility of fossil fuels from people’s bills,” Mr Shanks said.
“We obviously hope that that will happen as quickly as possible, but there’s no shortcut to this, and there’s not an easy solution to building the clean power system that brings down bills.”
His comments come amid growing scepticism about the compatibility of cutting bills as well as carbon emissions, and growing evidence that the government’s pursuit of a clean power grid by 2030 is contributing to higher bills.
While wholesale gas prices have fallen from their peak following the Russian invasion of Ukraine in 2022, energy bills remain around 35% higher than before the war, inflated by the rising cost of reducing reliance on fossil fuels.
The price of subsidising offshore wind and building and managing the grid has increased sharply, driven by supply chain inflation and the rising cost of financing major capital projects.
In response, the government has had to increase the maximum price it will pay for offshore wind by more than 10% in the latest renewables auction, and extend price guarantees from 15 years to 20.
The auction concludes early next year, but it’s possible it could see the price of new wind power set higher than the current average wholesale cost of electricity, primarily set by gas.
Renewable subsidies and network costs make up more than a third of bills and are set to grow. The cost of new nuclear power generation will be added to bills from January.
The government has also increased so-called social costs funded through bills, including the warm home discount, a £150 payment made to around six million of the least-affluent households.
Gas remains central to the UK’s power network, with around 50 active gas-fired power stations underpinning an increasingly renewable grid, and is also crucial to pricing.
Because of the way the energy market works, wholesale gas sets the price for all sources of electricity, the majority of the time.
At Connah’s Quay, a gas-fired power station run by the German state-owned energy company Uniper on the Dee estuary in north Wales, four giant turbines, each capable of powering 300,000 homes, are fired up on demand when the grid needs them.
Energy boss: Remove policy costs from bills
Because renewables are intermittent, the UK will need to maintain and pay for a full gas network, even when renewables make up the majority of generation, and we use it a fraction of the time.
“The fundamental problem is we cannot store electricity in very large volumes, and so we have to have these plants ready to generate when customers need it,” says Michael Lewis, chief executive of Uniper.
“You’re paying for hundreds of hours when they are not used, but they’re still there and they’re ready to go at a moment’s notice.”
Michael Lewis, chief executive of Uniper
He agrees that shifting away from gas will ultimately reduce costs, but there are measures the government can take in the short term.
“We have quite a lot of policy costs on our energy bills in the UK, for instance, renewables incentives, a warm home discount and other taxes. If we remove those from energy bills and put them into general taxation, that will have a big dampening effect on energy prices, but fundamentally it is about gas.”
The chancellor is understood to be considering a range of options to cut bills in the short term, including shifting some policy costs and green levies from bills into general taxation, as well as cutting VAT.
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Tories and Reform against green energy
Stubbornly high energy bills have already fractured the political consensus on net zero among the major parties.
Under Kemi Badenoch, the Conservatives have reversed a policy introduced by Theresa May. Shadow energy secretary Claire Coutinho, who held the post in the last Conservative government, explained why: “Net zero is now forcing people to make decisions which are making people poorer. And that’s not what people signed up to.
“So when it comes to energy bills, we know that they’re going up over the next five years to pay for green levies.
“We are losing jobs to other countries, industry is going, and that not only is a bad thing for our country, but it also is a bad thing for climate change.”
Claire Coutinho tells Sky News net zero is ‘making people poorer’
Reform UK, meanwhile, have made opposition to net zero a central theme.
“No more renewables,” says Reform’s deputy leader Richard Tice. “They’ve been a catastrophe… that’s the reason why we’ve got the highest electricity prices in the developed world because of the scandal and the lies told about renewables.
“They haven’t made our energy cheaper, they haven’t brought down the bills.”
Mr Shanks says his opponents are wrong and insists renewables remain the only long-term choice: “The cost of subsidy is increasing because of the global cost of building things, but it’s still significantly cheaper than it would be to build gas.
“And look, there’s a bigger argument here, that we’re all still paying the price of the volatility of fossil fuels. And in the past 50 years, more than half of the economic shocks this country’s faced have been the direct result of fossil fuel crises across the world.”
They’ve been billed as the “most sweeping asylum reforms in modern times” and the “biggest shake-up of the legal migration system” in nearly 50 years, but how are the UK’s rules actually changing?
One of the biggest changes will impact almost two million migrants already living in the UK while other proposals will affect people who come here in the future.
Here’s how…
How is ‘settled status’ changing?
Until now, migrants who live in the UK have needed to wait five years before they can apply to settle permanently but this qualifying period will double to 10 years – and some people could have to wait even longer.
Almost two million migrants will be affected by the changes.
Those “making a strong contribution to British life” will benefit from a reduced timeframe.
That means doctors and nurses working in the NHS will be able to settle after five years, while high earners and entrepreneurs may able to stay after just three years.
Migrants who speak English to a high standard and volunteer could also have a faster route to settlement.
NHS doctors and nurses will be eligible for settled status in five years still. Pic: iStock
At the other end of the scale, low-paid workers will be subject to a 15-year wait.
With this, the government is explicitly targeting the 616,000 people and their dependents who came to the UK on health and social care visas between 2022 and 2024 – the so-called “Boriswave”.
The government is going further still in targeting migrants who rely on benefits, quadrupling the current wait to 20 years.
There are also plans to limit benefits and social housing to British citizens only.
And though recognised refugees who came to the UK legally will still be eligible for public funding, they too will be subject to the 20-year timeframe.
How will asylum rules change?
Inspired by immigration policy in Denmark, refugee status will become temporary, lasting only until it’s safe for the person in question to return home.
This means that asylum seekers will be granted leave to remain for 30 months, instead of the current five years, with the period only extendable if they still face danger in their homeland.
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Home secretary sets out migration rules
However, refugees will be eligible to settle sooner if they get a job or enter education “at an appropriate level” under a new “work and study” visa route, and pay a fee.
The government also plans to revoke its legal duty to support asylum seekers who would otherwise be destitute, a measure it says was introduced to comply with EU laws which Britain is no longer bound by.
Instead, support will be discretionary, and some people will be excluded – such as criminals, those who refuse to relocate, those who can work but won’t, those who are disruptive in their accommodation, and those who deliberately make themselves destitute.
Additionally, asylum seekers who have assets or income will be required to contribute to the cost of supporting themselves.
What about illegal migrants?
Meanwhile, illegal migrants and those who overstay their visas face a wait of up to 30 years before qualifying for permanent settlement.
But plans to bar criminals from settlement are still being figured out, with the government saying “work will take place to consider the precise threshold” at which someone is ineligible.
“The reforms will make Britain’s settlement system by far the most controlled and selective in Europe,” according to the government.
Alongside the new measures, plans are afoot to boost the number of migrants being removed from the UK.
People thought to be migrants onboard a small boat in Gravelines, France. Pic: PA
What about illegal migrants who are already here?
A “one in, one out” agreement is already in place with France, under which those who cross the channel illegally are to be sent back, with Britain accepting instead a “security-checked migrant… via a safe and legal route”.
“This pilot is under way, and the government is working in partnership with French on expansion,” according to the government.
Furthermore, refugees will not have automatic family reunion rights, and the removal of families of failed asylum seekers is to be stepped up.
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Perhaps controversial are plans to offer financial support to those who agree to go voluntary.
The government argues this is “the most cost-effective approach for UK taxpayers and we will encourage people to take up these opportunities”.
Sanctions will also be imposed on nations that fail to cooperate on the return of their citizens, including suspending visas for that country.
And for those who are refused refugee status, the appeals process is to be streamlined, with one route of appeal, judged by one body, requiring applicants to make all their arguments in one go, instead of making multiple claims.
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Inside Britain’s asylum seeker capital
Human rights legislation will be reformed too, in a bid to reduce legal challenges to deportations.
Finally, the number of arrivals accepted through “safe and legal routes” will be capped, “based on local capacity to support refugees”.
The reforms will not apply to people with settled status, and there will be a consultation on “transitional arrangements” in some cases.
The five-year wait for immediate family members of UK citizens remains unchanged, as it does for Hong Kongers with British national (overseas) visas.
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